Budget lawmakers unite on stimulus

Urge fast-acting, temporary measures, seek offsets

By

WilliamL. Watts

WASHINGTON (CBS.MW) - It's OK for the budget to fall into deficit in fiscal 2002 to boost the economy, provided the stimulus measures are fast-acting and temporary, top Democratic and Republican budget lawmakers said Thursday.

But, in a report laying out what they see as key guidelines for an economic recovery package, they also urged congressional tax writers and the administration to offset stimulus measures, with increased revenues or spending cuts in later years.

Senate Budget Committee Chairman Kent Conrad, D-N.D., said the guidelines were designed to prevent a "cyclical deficit from turning into a structural deficit."

Without additional stimulus measures, the fiscal 2002 surplus was seen at $52 billion, according to estimates by staff members of the House and Senate budget panels. That's down from $176 billion forecast by the Congressional Budget Office in August.

Between 2002 and 2011, the budget staffs see a revised total surplus of $2.604 trillion, down from CBO's forecast of $3.397 trillion.

President Bush and Treasury Secretary Paul O'Neill on Wednesday offered a broad outline of a stimulus package, calling for $60 billion to $75 billion worth of additional measures. See earlier story.

Neither the administration nor congressional leaders have offered a detailed plan. The White House has emphasized a desire to speed up personal tax rate cuts and provide investment-oriented tax cuts to businesses.

Bush on Thursday announced he would work to extend unemployment benefits by 13 weeks in states hit hardest by the attacks. In an appearance at the Labor Department, he also encouraged states to sign up children for a government-run health care program. The program already has roughly $11 billion available and unclaimed by the states.

The White House has signaled openness toward Democratic proposals to provide tax breaks to working poor and middle income taxpayers who didn't participate in the income tax rebates distributed this year.

Some Democrats have also called for spending measures to build roads, bridges and other infrastructure. Some Republicans are seeking capital gains tax rate cuts and permanent measures to boost investment.

Conrad, Sen. Pete Domenici of New Mexico, the senior Republican on the budget panel; House Budget Committee Chairman Jim Nussle, R-Iowa; and the House panel's top Democrat, Jim Spratt of South Carolina, authored the report. Before Sept. 11, the lawmakers had been engaged in fierce partisan battles over the Social Security surplus and the budget outlook.

The partisanship has gone by the wayside -- at least for now -- in the wake of the deadly attacks, which hit amid a major U.S. economic slowdown. The lawmakers, however, said they were still committed to ensuring preservation of the Social Security surplus over the long term.

"The American people are being shown right here that when we want to we can lock arms and do something in a unified manner with both Democrats and Republicans on board," Domenici said.

Quick impact, and short life span

Noting that past government efforts to provide a fiscal stimulus have often missed the mark, arriving as the economy began to pick up steam, the lawmakers said it was crucial that the stimulus be designed to ensure that a "substantial portion" of the fiscal impact is felt within six months. They urged officials to work toward completing a package within three to four weeks.

The report said all stimulus proposals should sunset within one year, where possible. The lawmakers wouldn't comment, however, on whether specific proposals could be crafted to meet that criterion.

"Policies should achieve the greatest possible stimulus effect per dollar spent and should be directed to individuals who are mot likely to spend the additional after-tax income and businesses mot likely to increase investment spending and employment," the guidelines said.

Lobbyists and lawmakers from both parties have brought up a range of potential tax and spending measures, many targeted toward specific industries. Tax writers and congressional leaders said they would resist efforts to turn the package into a "Christmas tree" of pet projects.

"This is not an opportunity for everybody with a good idea, you know?" said Senate Minority Leader Trent Lott, R-Miss.

Key legislators and administration officials have some quick but detailed number-crunching to do as they work to craft a stimulus package.

First of all, they must first figure out how much stimulus they've already provided through plans to boost overall spending in fiscal 2002, a $40 billion emergency spending package and a $15 billion bailout program for the airline industry which includes $5 billion in direct subsidies, Senate Majority Leader Tom Daschle, D-S.D., told reporters Thursday morning.

Daschle said participants agreed that House Ways and Means Committee Chairman Bill Thomas, R-Calif., and Senate Finance Committee Chairman Max Baucus, D-Mont., the nonpartisan Joint Tax Committee, and others would begin running numbers on a range of proposals in an effort " to give us as many options and the cost of those options as is appropriate."

Daschle said a stimulus ranging between $50 billion and $75 billion was reasonable, but emphasized that Democrats were more comfortable with a figure closer to $50 billion, "given the fact that we are borrowing every dollar of the money that will go to the stimulus," returning the U.S. budget to a deficit.

The administration has indicated it's open to Democratic calls for tax relief aimed at working poor and others who, because they don't pay income tax, didn't get a rebate this year as part of the 10-year, $1.35 trillion tax cut.

Republicans have generally emphasized tax cuts aimed at businesses, which were largely left out of the earlier tax package, including measures that would allow quicker depreciation of capital items and provide relief from the corporate alternative minimum tax.

Some Democrats have also called for increased spending on roads, bridges and other infrastructure items.

Daschle said economists have told him that all of the proposed stimuli would have "about the same impact on the economy," provided the measures were done immediately and for only the short-term.

"Our hope is that we can find the proper balance between spending and tax cuts, and that within tax cuts that we find the proper balance between investment incentives or whatever, ... as well as consumptive encouragement on the part of individual consumers," Daschle said.

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